The radical Islamist cleric Abu Qatada is to be released from Long Lartin high security prison after winning his latest legal challenge against being sent back to Jordan, where he faces allegations of plotting bomb attacks.

Abu Qatada, who was once described by a Spanish judge as Osama bin Laden's righthand man in Europe, is to be released on Tuesday on an electronic tag to enforce a 16-hour curfew between the hours of 4pm and 8am and under severe restrictions as to who he can meet.

His release, following a ruling by the special immigration appeals commission (Siac), is a setback for the home secretary, Theresa May, who personally secured assurances from the Jordanian authorities that Abu Qatada would not face a trial based on evidence obtained by torture. She intends to fight the ruling, and the Home Office immediately gave notice of its intention to go directly to the court of appeal.

Mr Justice Mitting and the two other senior judges who allowed Abu Qatada's appeal said that despite those assurances a real risk remained that he would face a trial based on such evidence. They said changes needed to be made to the Jordanian criminal code before they could be satisfied that the risk no longer existed.

The Home Office expressed disappointment, saying the judges had applied the wrong test. "The government strongly disagrees with this ruling. We have obtained assurances not just in relation to the treatment of Abu Qatada himself, but about the quality of the legal processes that would be followed throughout his trial," it said.

"Indeed, today's ruling found that 'the Jordanian judiciary, like their executive counterparts, are determined to ensure that the appellant will receive, and be seen to receive, a fair retrial'. We will therefore seek leave to appeal today's decision."

But the Siac ruling makes clear that while the judges agreed the Jordanian assurances meant Abu Qatada would not face ill-treatment or torture, they could not be satisfied that previous evidence obtained by torture would not be admitted at any retrial.

Abu Qatada, whose real name is Mohammed Othman, has waged a seven-year fight against his deportation. He has previously been described by the British courts as "a truly dangerous individual at the centre in the United Kingdom of terrorist activities associated with al-Qaida".

The three Siac judges – Mitting, Peter Lane and Dame Denise Holt – recommended his release on bail. His lawyer, Edward Fitzgerald, QC, told the court: "There is no justification for continuing to deprive Mr Othman of his liberty. Enough is enough, it has gone on for many, many years."

The ruling is a blow to the home secretary's renewed strategy of deporting international terror suspects with diplomatic assurances about their future treatment. May travelled to Jordan to negotiate the fresh assurances, but without the legal backing of British judges the deportation cannot go ahead.

The radical cleric has been released for three brief periods since he was first incarcerated in Belmarsh prison in 2002 under emergency anti-terror legislation. When he was released this year he faced the most draconian bail conditions ever imposed in Britain, including a 22-hour curfew.

Abu Qatada is regarded as having wide and high-level support among Islamist extremists. The al-Qaida leadership made threats this year in relation to his possible deportation.

The home secretary came close to deporting Abu Qatada in April when she tried to get him on a plane by certifying his opposition to his removal as "manifestly unfounded". But confusion over the deadline for Abu Qatada to appeal against a Strasbourg human rights ruling thwarted the attempted deportation.

The European court of human rights ruled in January that there was a real risk Abu Qatada would face a retrial based on torture-tainted evidence from his co-accused, Abu Hawsher and Al-Hamasher, over charges relating to bomb attacks on US and Israeli targets in Jordan in the late 1990s.

The key passage of the Siac ruling upheld that judgment: "The secretary of state has not satisfied us that, on retrial, there is no real risk that the impugned statements of Abu Hawsher and Al-Hamasher would be admitted probatively against the appellant.

"Until and unless a change is made to the [Jordanian] code of criminal procedure and/or authoritative rulings are made by the court of cassation or constitutional court which establish that statements made to a public prosecutor by accomplices who are no longer subject to criminal proceedings cannot be admitted probatively against a returning fugitive and/or that it is for the prosecutor to prove to a high standard that the statements were not procured by torture, that real risk will remain," the judges said.

"For the reasons given on the article 6 issue [on torture], we are satisfied that the secretary of state should have exercised her discretion differently and should not have declined to revoke the deportation order. Accordingly, this appeal is allowed," they concluded.